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Project Finance and Sustainable Development in the Global South

Shawkat Alam et al., eds., International Environmental Law: Perspectives from the Global South, Cambridge University Press, 2014, Fothcoming

20 Pages Posted: 23 Mar 2014  

Shalanda Helen Baker

William S. Richardson School of Law

Date Written: March 1, 2014

Abstract

This chapter explores the dominant mechanism for financing energy development projects — project finance — and argues that the assumptions supporting its prevalent use are ill suited for sustainable development in the Global South. This critique aligns itself with the growing chorus of voices calling for a retrenchment of neoliberal development, more active engagement by the state, and greater community involvement in development choices. The chapter begins with an explication of project finance. This introduction provides an overview of much of the literature that lauds project finance as a mechanism to hedge and reduce developer economic risk. The section also underscores the key features and assumptions of project finance. The second part of the chapter introduces a case study involving the development of wind energy resources in rural Oaxaca, Mexico, one of the windiest places in the world. Drawing on this case study, the final section explores many of the ways in which project finance may undermine sustainable development in Oaxaca. The section revisits the assumptions underlying project finance, and suggests that these assumptions may be inconsistent with the goals of sustainable development. Thus, the chapter argues, project finance, as a mechanism for financing energy projects in the Global South, may need to be substantially altered or altogether abandoned as the prevailing financing mechanism for projects designed to meet the goals of sustainable development.

Keywords: project finance, environmental law, energy law, Global South, sustainable development, wind energy, Oaxaca, Mexico

Suggested Citation

Baker, Shalanda Helen, Project Finance and Sustainable Development in the Global South (March 1, 2014). Shawkat Alam et al., eds., International Environmental Law: Perspectives from the Global South, Cambridge University Press, 2014, Fothcoming. Available at SSRN: https://ssrn.com/abstract=2411735

Shalanda Helen Baker (Contact Author)

William S. Richardson School of Law ( email )

2515 Dole Street
Honolulu, HI 96822-2350
United States
8089569435 (Phone)
8089569435 (Fax)

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